Interest rate cuts: Why you have the power to demand better

Banks that didn’t pass on the full Reserve Bank interest rate cut this week have been in the firing line of an angry public and politicians. But talk is cheap — vote with your feet.

If your bank is one of those that’s not giving you last week’s full Reserve Bank 0.25 per cent interest rate cut, there’s a simple solution.

Tell them to stick their home loan where the sun won’t shine.

To say that there’s been anger about ANZ, Westpac and some other banks pocketing some of the RBA’s cut for themselves is an understatement.

The fact that they did this while experts everywhere — including RBA chairman Philip Lowe and Treasurer Josh Frydenberg — said they had no reason to is beyond belief, especially so soon after the damning banking royal commission.

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It’s interesting to note that the Commonwealth Bank and NAB, which suffered greater reputational damage at the royal commission, dutifully followed the Reserve Bank last week by announcing full 0.25 per cent cuts.

While ANZ’s 0.18 per cent standard variable rate cut and Westpac’s 0.2 per cent cut might only cost average borrowers a few extra dollars a week, the image of greedy, uncaring banks that haven’t learned lessons from the past is a powerful one.

Westpac and ANZ’s smaller-than-expected rate cuts may only cost borrowers a few bucks a week, but it’s the vibe... a bad vibe.

And with everyone from consumer groups to the RBA telling people to shop around, it’s about time that disgruntled borrowers vote with their feet.

The big banks’ new standard variable mortgage rates now range from 5.11 per cent to 5.18 per cent. Many customers get discounts over 1 per cent knocked off that, but they’re still higher than the competition.

Some lenders offer variable rates around 3.5 per cent. That’s a massive saving of more than $300 a month on a typical $350,000 mortgage compared with big bank standard variable rates, and over the life of the loan borrowers would save around $100,000 in total interest payable.

Big banks still dominate the mortgage market and rely on homeowners not having the time or inclination to switch lenders.

Imagine if someone wanted to grab $300 out of your purse or wallet every month. You wouldn’t let it go lightly, so why let the banks do it?

Comparison website Mozo says smaller lenders such as Mortgage House, Reduce Home Loans and Tic Toc offer much lower rates, and that now is a good time to be in the market for a home loan.

Stricter lending criteria has been stopping some borrowers from switching, but new plans by regulator APRA to ease up home loan serviceability calculations will give more people the power to change.

Do some research to find out how your current rate stacks up against others. Check several online comparison sites as each may show deals from a different suite of financial institutions.

Then you can approach your own bank and others. Remember that you’re the customer and that lenders everywhere are scrambling for new business.

If your bank can’t match or beat others’ deals, find one that will and be prepared to walk.

They should try to keep you if you’re a good customer. Switching is easier than ever, and a new lender will help you transfer other accounts and direct debits.

Watch the mortgage space, as economists predict between one and three more RBA cuts in the coming months. Greedy banks will be given a chance to redeem themselves, but don’t count on it.

@keanemoney